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Updated over 6 years ago on . Most recent reply
Is buying Gas station in Phoenix (Glendale) area advisable?
Hello all,
very new member to this forum.
I am middle of a deal to acquire a gas station in Glendale, AZ (Phoenix area). The deal is with real estate and an auto repair shop. Owner financing is available with 20% down.
However, I have seen many gas station shutting their door recently. Now my question is (I will appreciate any advise.)
Is buying Gas station in Phoenix (Glendale) area advisable?
Most Popular Reply
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@Pravin Kumar Assuming that you're buying both the business and the real estate, you need to look at a lot of different aspects.
Sales - is there a gas delivery contract? If so, are you paying rack rate? I've seen prices as high as rack + $0.03 and as low as rack -$0.02. How many gallons/month are you pumping? Are the pumps self-serve? In decent condition? Do you have diesel?
Services - Is there a convenience store? With beer & wine? Tobacco? Lottery? Groceries? If not, can you add them?
In the several stations I've listed, gas sales are not a huge profit center. It's the gas that brings the customers in for all of those ancillary items. Gas is typically sold at a profit of $0.10 - $0.20 profit per gallon.
Auto repair - Around here, the state restricts availability of inspection sticker machines - and these drive a lot of auto repair. They sell anywhere from $75,000 to $200,000 in these parts. How about a mechanic? Will he stay with the business? What's your Plan B is not?
Used car sales - this goes hand in hand with the repair business. Does this station have or need a license to sell used cars?
Environmental - I don't know anything about AZ laws, but here in MA, all single-wall steel tanks had to be replaced by 8/2017. There's no requirement to replace double wall steel - yet. You need to know what AZ says about the topic. Your lender will also require an environmental survey. If there's existing contamination, cleanups can be catastrophically expensive. Is there a Veeder-Root or similar gas sale / leak detection system?
Facilities - what condition is the building in? How about the canopy? Paving?
Reputation - I have seen one gas station owner destroy his business by letting a tenant sell gas at $1.50/gallon above all of the area competition. I stood there for over an hour on multiple occasions while showing the property and saw a total of 3 cars. The business ultimately failed and he leased the land to a used car dealer. Don't buy a business that needs to be rebuilt.
Traffic - does AZ DOT have traffic surveys available? MA DOT does and I can always find a nearby count. If the road only gets 5,000 vehicles/day, it's nowhere near as attractive as one that's getting 40,000/day.
Competition - How many competitors are within a mile? You mentioned that several closed. Why? They could either re-open and come back to hurt you, or be converted to another use.
Good luck!